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How to get out from under your holiday debt hangover

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The holiday season is often one of over-indulgence - too much food, too much alcohol and plenty of spending.

Research by CreditSavvy last year found that 54% of Aussies don't set a budget for the holiday season and one in three spend more than they can afford during that time.

As a result, many people are left with a post-Christmas debt hangover - an estimated 35% of cardholders don't expect to pay off their credit card bills on time, according to Finder.

holiday debt hangover

If you're feeling the pain of Christmas spending you may be tempted to take advantage of a balance transfer deal to get your debt under control.

RateCity found that 56% of credit cards have a 0% intro deal as banks look to capture a share of people wanting to reduce post-Christmas debt.

And they can be a great option - as long as you're smart about it.

"Zero per cent balance transfer cards can be a useful tool if you have a small amount of debt to clear and you have a foolproof plan to pay it back before the introductory period expires," says Sally Tindall, money editor at RateCity.

"It's also wise to refrain from using the card to make new purchases or cash advances, so the best place for it is the freezer."

RateCity has tracked down some of the best offers available for Money readers - both for terms under 12 months and longer periods.

Traps to watch for include:

  • Is there a transfer or handling fee? Tindall says these fees are becoming more commonplace, with around one in five cards charging up to 2.5% of the debt.
  • What is the annual fee on the card? This can also add to the cost of transferring your debt. "The longest intro period is now up to two years, and while this might seem like a win it does attract two annual fees, or three if you're a bit late cancelling your card," says Tindall.
  • What is the interest rate if you don't pay off the debt in the intro period? "Banks rely on the fact that some people don't repay the balance in full during the intro period and revert to an extremely high interest rate of up to 22%," says Tindall.
  • Is there a balance transfer limit? Some institutions will only let you transfer up to a certain amount - usually a percentage of the credit limit they are offering you. So let's say you have $9000 to transfer but the new provider has a limit of 90%; that means you'll need a limit of $10,000 on the new card to transfer the entire debt. Otherwise you'll be left with two cards to pay off.

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Maria Bekiaris is editorial campaigns manager for Canstar and former deputy editor of Money. She holds a Bachelor's degree in business.
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